Friday, May 9, 2008

Mortgage applications jump 15%, mixed signals abound

Mixed signals continue to abound in the US housing market as the National Association of Realtors announced that March pending home sales fell 1% on the same day that the Mortgage Bankers Association announced a 15% jump in mortgage applications and a better than 12% jump in purchase mortgage applications. The increase in mortgage applications highlights the futility of applying a seasonal adjustment to pending home sales, which are influenced by short term cycles of weather and interest rates and short term consumer planning that don’t fit broad seasonal trends. In the case of March sales, buyers had ample reason to put off buying for a couple of months - adding an $1800 tax rebate for a family of four to the down payment fund, a potential tax credit for buying foreclosure properties as early as this summer and temporary turbulence that drove mortgage interest rates up for a few weeks in March and April. Now that those rate problems have resolved themselves with 30-year Fixed Rate Mortgage (FRM) rates below 6% and 15-year FRM rates below 5.5%, buyers are back at the table.

Average Mortgage Rates

30-year FRM: 5.91%, 1.12 points*
15-year FRM: 5.49%, 1.07 points
1-year ARM: 6.77%, 1.35 points

* Points reported by Mortgage Bankers Association in this survey include origination fees as well as traditional discount points. Average rates are based on an 80% LTV loan. This means a loan amount no more than 80% of the property value as determined by the lower of the purchase price or appraised value. Typically this means a 20% down payment, though an 80% loan can also be achieved with a second mortgage carried by the seller or a third party lender for the difference between the actual down payment and 20%.